Section 35.2
Life and Health Insurance
Section 35.2 Life and Health Insurance
What You’ll Learn
How to describe the main types of life
insurance (p. 755)
How to recognize risks that are not
covered by insurance (p. 758)
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
What You’ll Learn
How to explain the main types of health
insurance and the plans that are available.
(p. 759)
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Why It’s Important
Knowing how to determine your life and
health insurance needs will help you handle
your finances when dealing with unexpected
events.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Legal Terms
life insurance (p. 755)
straight life insurance (p. 755)
universal life insurance (p. 755)
limited-payment life insurance (p. 755)
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Legal Terms
endowment insurance (p. 755)
annuity (p. 756)
term insurance (p. 757)
Medicare (p. 761)
Medicaid (p. 761)
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section Outline
Life Insurance
Straight Life Insurance
Limited-Payment Life Insurance
Endowment Insurance
Annuity
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section Outline
Life Insurance, continued
Accidental Death and Dismemberment
Insurance
Term Insurance
Exemptions from Risk
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section Outline
Health Insurance
Insurance Plans
HMOs and PPOs
Government Health Care Plans
Disability Insurance
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Pre-Learning Question
What is life insurance?
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Life Insurance
Life insurance is an insurance
contract that provides monetary
compensation for losses suffered as a
result of someone’s death.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Life Insurance
Premiums for life insurance are based
on several factors.
age and health of insured
coverage
type of policy
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Straight Life Insurance
Straight life insurance, also called
ordinary life insurance and whole life
insurance, requires the payment of
premiums throughout the insured’s
life. The premiums remain constant
throughout the policy.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Straight Life Insurance
Upon the insured’s death, the
beneficiary is paid the face value of
the policy. Because straight life
insurance builds up a cash and loan
value, it provides savings as well as
protection.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Straight Life Insurance
Universal life insurance, a form of
straight life insurance, allows
policyholders to change the terms of
the policy as their needs change.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Limited-Payment Life Insurance
Limited-payment life insurance
allows you to stop paying premiums
after a stated length of time—usually
10, 20, or 30 years.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Limited-Payment Life Insurance
The beneficiary will receive the
amount of the policy upon the death of
the insured, whether it occurs during
the payment period or after.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Endowment Insurance
Endowment insurance provides
protection for a stated time, generally
20 to 30 years. The face value of the
policy is paid to the insured at the end
of the agreed period.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Endowment Insurance
If the insured dies before the end of
the agreed period, the full amount is
paid to the beneficiary at the time of
death.
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Insurance Protection
Section 35.2 Life and Health Insurance
Annuity
An annuity is a guaranteed retirement
income that is purchased by paying
either a lump-sum premium or making
periodic payments to an insurer.
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Insurance Protection
Section 35.2 Life and Health Insurance
Annuity
You may choose to receive an income
for a certain fixed number of years,
with a beneficiary receiving what is left
of the annuity when you die.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Annuity
Alternatively, you may choose to
receive payments as long as you live,
losing what is left of the annuity upon
death.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Accidental Death and
Dismemberment Insurance
Accidental death and dismemberment
insurance provides benefits only when
the insured is killed in an accident,
loses the use of one or more limbs, or
loses sight in one or both eyes.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Term Insurance
Term insurance is issued for a
particular period, usually five or ten
years.
It is the least expensive kind of life
insurance because it has no cash or
loan value.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Term Insurance
Premiums for term insurance increase
at the end of each term because the
insured is older and is considered a
greater risk.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Exemptions from Risk
Some states do not allow beneficiaries
to receive life insurance proceeds if
the insured is legally executed or if the
insured is killed by the police while
trying to avoid capture.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Exemptions from Risk
In most cases, the courts allow a
beneficiary to receive benefits under a
life insurance policy when the insured
is murdered, except when the
murderer is the beneficiary.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Name the type of insurance described
below.
Renée Morris, who is a firefighter in
New York City, purchased insurance
that pays her a benefit if she loses a
limb or her eyesight.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
The insurance also pays her
beneficiary, a brother, if she dies in an
accident.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
ANSWER
Accidental death and dismemberment
insurance.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Cicero Jones is the Chief Financial
Officer of Batek Corporation. He
recently purchased insurance to
provide monetary compensation to his
family in the event of his death.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Mr. Jones will pay premiums
throughout his life; however, terms
and coverage can change as needed,
and cash can be withdrawn without
canceling the policy.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
ANSWER
Universal life insurance.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Pre-Learning Question
What benefits does health insurance
include?
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Health Insurance
Basic health insurance often includes
the following benefits:
inpatient and outpatient hospital
care
physician care
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Health Insurance
surgery
prescription drugs
dental and vision care
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Health Insurance
Major medical coverage pays for
expenses beyond those covered by a
basic plan, including long-term
hospitalization and the cost of
catastrophic illness.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Insurance Plans
Health insurance companies offer a
variety of health insurance plans to
make some degree of health
insurance coverage available to most
people. The type of coverage people
carry depends on their individual
situations.
Understanding Business and Personal Law
Insurance Protection
35.2 35.2 Life and Health Insurance
Section
Health Insurance Must Haves
A health insurance plan should:
Offer basic coverage for hospital and doctor bills.
Provide at least 120 days’ hospital room and board in full.
Provide at least $1 million lifetime maximum for each family member.
Pay at least 80 percent for out-of-hospital expenses after a yearly
deductible of $500 per person or $1,000 per family.
Impose no unreasonable exclusions.
Limit your out-of-pocket expenses to no more than $3,000 to $5,000 a year,
excluding dental, vision care, and prescription costs.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Group Plans
Many people get their health
insurance through a group insurance
plan where they work. Insurance
companies can offer lower premiums
to large groups, and many employers
pay part of the premium for each
employee.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Individual Plans
People who work for a company that
does not offer health insurance or who
are self-employed can buy individual
health insurance.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Individual Plans
This insurance is more expensive than
group insurance because the cost
cannot be spread among a large
group of people.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
HMOs and PPOs
HMOs and PPOs are other types of
health insurance plans.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Health Maintenance Organizations
Health Maintenance Organizations
(HMOs) contract with doctors and
other healthcare professionals to
provide healthcare services for their
members.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Health Maintenance Organizations
Members pay monthly premiums and
must choose from a list of doctors
provided by the HMO.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Preferred Provider Organizations
A Preferred Provider Organization
(PPO) is a group of healthcare
providers, such as doctors or
hospitals, who provide care for groups
of employees at reduced rates.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Government Health Care Plans
People over 65 who are covered by
social security are eligible for
Medicare, a federally funded health
insurance program.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Government Health Care Plans
Medicaid is a healthcare plan for lowincome people. State governments
administer Medicaid, which is funded
by both state and federal funds.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Disability Insurance
Disability insurance pays you benefits
when you can’t work because of a
disability.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
1. What are the principal types of life
insurance? Briefly describe each
one in your own words.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
Answer
(1) Straight life—requires payment of
premiums through the insured’s life. The
premiums remain constant.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
Answer
(2) Universal life—a form of straight life
insurance but it allows policyholders to
change the terms of the policy as their
needs change. Premiums fluctuate
according to the changes.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
Answer
(3) Limited-payment life—provides that the
payment of premiums will stop after a
stated length of time. (4) Endowment—
provides protection for a stated time.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
Answer
(5) Term—issued for a particular period. It
has no cash or loan value. (Answers may
vary but should closely parallel the
descriptions in the chapter.)
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Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
2. What risks are generally not
covered by insurance?
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Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
Answer
Some states do not allow beneficiaries to
receive life insurance proceeds when an
insured is legally executed or killed by the
police to avoid capture. When the
beneficiary is the murderer of the insured,
no proceeds are allowed.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
3. What benefits are provided by basic
health insurance? Major medical?
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Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
Answer
Basic—inpatient and outpatient hospital
care, physician care, surgery, prescription
drugs, and dental and vision care.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Reviewing What You Learned
Answer
Major medical—covers expenses beyond
those covered by a basic plan, including
long-term hospitalization and catastrophic
illness.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Critical Thinking Activity
Life Insurance
Who needs life insurance? Explain your
answer.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Critical Thinking Activity Answer
Life Insurance
Answers will vary but should include that
any person whose death would leave a
financial burden on someone else should
have life insurance.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Legal Skills in Action
Calculating Future Premiums
Kim Lee has decided to purchase dental
and vision insurance. Her agent quoted her
a price of $250 per year but told her the
price will probably increase a little each
year.
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Legal Skills in Action
Calculating Future Premiums
If it increases three percent per year every
year, what will her premium be 10 years
from now?
Understanding Business and Personal Law
Insurance Protection
Section 35.2 Life and Health Insurance
Section 35.2 Assessment
Legal Skills in Action Answer
Calculating Future Premiums
$335.98
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Insurance Protection
End of Section 35.2
Life and Health Insurance